mbozek

How is it possible to file a W-2 for an employee of another employer under your EIN especially since you are not an employer eligible to maintain a 457 plan and Form 2678 does not authorize such a designation? Also how do you fill in the block as to whether the employee participates in an employer retirement plan if the employee does not work for you?

Who is the provider for the plan that is being acquired? Is it an insurance company?

Under IRC 457(e)(7) includible compensation in a 457 plan is determined without regard to any community property law.

The problem will exist not just for this year but for all future years MRD and expenses. Best thing is to sell property and reinvest proceeds in more liquid investments such as mutual funds, etfs. Client has to balance reducing asking price on RE value against paying about $5000 in penalty tax every year. According to MRD RE is valued at about $228k.

A living trust can be a bene of a retirement benefit b/c it has 1 or more trustees who hold the property for the trust beneficaries. Has the plan tried to find out who the trustee is? Has the trustee ever applied for benefits? Or is this one of those stupid situations where the employee named his living trust as beneficiary but never told the trustee of the living trust or heirs so they dont know that there are additional assets?

Thank you Belgarath! Further question, if I may. All contributions were made to th Plan during the time that the business had employees. After the owner retired, the business was wound down and there were no further employees. That is why the Plan is an owner-only plan now. Distributions were made from the Plan to the employees of their accrued benefits. Since the Plan in fact benefited persons other than the owner over the period that contributions were made to the Plan, shouldn't the Plan, even though "owner-only" now, continue to be protected by ERISA? Many thanks! interesting Q. 5500-EZ instructions P 2 state that an EZ form can only be filed by a plan that only covers owners and their spouses and does not provide benefits for anyone else. This statement is ambiguous in that it could mean that the plan is exempt from ERISA only if there are no benefits held under the plan for non owners in the year the 5500 EZ is filed or that the Plan is exempt from ERISA only if the plan terms do not provide for any benefits to non owners regardless of whether benefits were ever held/provided benfits for non owners in prior plan years. In any event the plan benefits may be protected from the owner's general creditors if the plan contains a spendthrift provision that prohibits payment of benefits to creditors of a participant. There is some state case law which has upheld the validity of state spendthrift provisions for owners who were not protected under the non alienation provisions of ERISA. Other states have laws that prohibit seizure of benefits held in IRAs or any qualified plans by a creditor. .

What is the TPA's responsibility for monitoring late contributions under its agreement with the employer? What is the cause of the late contributions, e.g., failure of the employer to transfer the contributions. Why aren't the contributions transferrred automatically on payday?

The thing I enjoy most about this industry is that you can learn something NEW every single day! Thanks, Tom. See Reg 1.401(a)(9)-3 Q/A-1 -Receiving first MRD before the RBD (4/1/11) does not change the fact that the retiree died before the MRD. If the retiree dies before the RBD then the remaining distributions are treated under the rules for pre RBD death, i.e, 5 year payout or commence periodic payments within 1 year or spousal rollover. Only exception is if retiree commenced payments under an annuity contract before RBD.

Do you still have a Q? If so just hit the add reply icon and enter your Q. As noted once benefits are paid into an IRA it is up to a state court to divide up the amount due the ex spouse in accordance with the marital property laws of the state. The amount can be transferred tax free to the ex spouse without the need for a QDRO.

If the client has elected to receive periodic annuity payments then the MRD is the amount of payments and no amount of the payment can be rolled over. If the client has not elected to receive periiodic benefits under the IRA annuity contract then MRDs under the reg 1.401(a)(9)-5 rules for DC plans must be taken each year.

See DOL opinion letter 2001-06A where the DOL determined that income withholding notices issued by the NY Division of Child Suport Enforcement or a county enforcement agency to collect back child support owed by an individual covered under a pension plan are enforceable if they meet the requirements for QDRO's other than being issued by a court. Under 42 USC 666(b)(8) pension benefits are subject to seizure under state enforcement proceeding for payment of back child support if the benefits are "due" to the individual, e.g., are in pay status. If the employer does not comply with a valid court order to withhold income from the employee after receipt of a proper notice, the employer must be held liable to the state for the amount. 42 USC 666(b)(6)©.

This is a complicated question for which tax advice is needed. A non resident alien can apply for an ITIN from the IRS which would allow her to have a tax id for IRA distributions. See W-7 application. As a general rule, a non spouse beneficiary can roll over a DC plan distribution to an IRA. However there are restrictions on opening an investment account under the Patriot act. You need to talk to IRA custodians to determine what the identification requirements for opening an inherited IRA account are. You need to check the US -canada tax treaty to see what the tax implications are. My recollection is that IRA payments to Canadan residents are subject to 15% US withholding tax.

1. who would be the plan sponsor? 2. Which corp would deduct the contributions? 3. what is the source of the 1099 comp?

This discussion of how retirement benefits are divided ignores the important question of what the divorce decree/property settlement provides as the formula for dividing up the retrement benefits. The divorce decree should provide a specific formula of what the rights of the AP are to benefits e.g., 50% of the accrued DB benefit as of a certain date and what % of the DC accounts will be given to the spouse. The divorce decree will state whether a pension benefit is excluded from the property settlement. The parties then negotiate the terms of the QDRO based upon the specific terms of the division of property approved by the court and the conditions set by the plan administrator. For example, some plans will not go back more than 12 months to determine the values of DC account balances included in the martial property. Other plans will charge a fee to research the values. If the parties were granted a divorce without a court approved property settlement setting the formula for dividing up the retirement benefits then they deserve the chaos that they have created b/c now they have to negotiate the division of property acquired during the marriage. There is plenty of information available if you google California community property law/retirement benefits.

CA community property excludes property acquired before the marriage or after separation and property acquired by gift, devise or inheritance.

GMK: The capital gains tax is only paid when the employer stock is sold, not in the year of distribution. Also CG tax can be reduced by the amount of carry over capital losses. If the employee holds the stock until death the heirs will get a stepped up basis on the stock which eliminates CG tax. Many privately held companies require that the stock be tendered back to the company when the employee retires or separates from service.

If the participant is not working in the year they turn 70 1/2 then an MRD will be required. The balance of the account must be be rolled over by Dec 31 to avoid having to take another MRD in 2012. Q if the employee is eligble to receive employer stock as a distribution why not elect to receive the stock as a lump sum distribution and elect to have the gains which exceed contributions taxed under the rules for NUA, i.e., 15% captial gains rate instead of ordinary income tax?

I'm pretty sure that the plan termination wants to happen way before the settlement is finalized Since the annuity is already part of the marital estate subject to division in divorce, the participant could request court permission to rollover the distribution to an IRA or request a distribution of an annuity contract and the court will order the spouse to give consent to the distribution. In both cases the court would then determine how the parties would divide up the IRA or annuity under state divorce law. The court could also allow the participant to retain the annuity contract and give other property to the spouse.

Short answer: If the participant is a party to a divorce then the 403b benefit will be part of the martial property subject to division by the court where the rights of both parties will be decided. If the court gives the annuity to the participant then the court can order the other spouse to grant consent to the distribution as a condition of the divorce under its contempt of court powers. The participant should consult his/her attorney.

GMCYWT: This is a question which can only answered by counsel to the plan. If the plan does not have counsel then the plan must retain competent ERISA counsel regardless of the cost. Under US supreme court decisions (see Kennedy v. Dupont) plan is required to pay whoever is the designated bene under the plan. State laws are preempted.

Yes if the payment from the annuity is an MRD under 401(a)(9) rules.

This is one of this situations where you will need to get an opinion letter from the DOL which has jurisdiction over PTs. Of course this will be expensive and the answer may be less than satisfactory.

short answer is its a prohibited transaction b/c he is using his account balance in the plan to benefit his personal account, i.e., to play golf. Only way it would not be a PT is if trustee never uses the golf course or never participates in any activity at the course, such social events, parties, etc.

ther are two ways for MRDs to be distributed froma an annuity contract in a DC plan such as an IRA. 1. If the annuity benefits is commenced then the MRD will be whatever is the amount of the annual payment under the terms of the annuity contract. 2. If the contract is not annuitized at 70 1/2, then the value of the contract at the end of each calender year will be subject to the MRD rules for the following year. E.g, $100,000 FMV on 12/31/10. If the individual attains 70 1/2 in 2011 then MRD for 2011 would be about 3.775% or $3775 due 4/1/2012.

The reason that there are no articles on this topic is because any reputable tax publication would not accept an article advocating using a sub trust to exclude LI from the decedent's estate without including citations of substantial authority under the IRC as to why use of the sub trust does not violate the exclusive benefit rule, the non alienation rule and the spousal benefit provisions applicable to qualified plans. I dont think any counsel could write an opinion complying with IRS circular 230 that the LI in a sub trust could be excluded from the decedent's estate without violating all three provisions of the IRC. Also you need to check on whether this use of LI to avoid estate tax is a listed transaction subject to monetary penalities if it is not reported to the IRS.